Had the United States Constitution vested authority for banking law exclusively with Congress, the history of American banking would likely have followed a another course. Such readers will not need a PhD in economics to grasp the details as the book manages to convey its points very effectively through illustration rather than equations or excessive banking jargon. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues. If instead you are looking for a deeper understanding of the causes of bank crises then I very much recommend the book. The United States has had twelve systemic banking crises since 1840, while Canada has had none.
The authors then present potential counter examples and show that overall their framework holds up well. For Charles Calomiris of Columbia University and Stephen Haber of Stanford University, however, the crisis was just the latest in a long series of banking crises throughout American history. He calls this tangled interplay, The Game of Bank Bargains. There can never be such a thing as an independent bank. The banks got support for the merger while the activist groups got the promises of billions of dollars of new loans to mostly high-risk borrowers. That means that the rate of inflation is higher than the interest paid on bank accounts. Their designers were not irrational or incompetent but were bound to particular times and places.
Covering the history of banking in America, Canada, Mexico and Brazil, the authors, in a clear and straightforward style, demonstrate how political conditions drive banking outcomes. The first is titled No Banks without States and No States without Banks. So it is not about what is best for a society or a nation but what is best for banking. The American system of banking continued until the 1980s, when a series of events reduced the viability of unit banking. Why are banking systems unstable in so many countries—but not in others? Taxpayers and shareholders paid for a crisis whose risks never appeared in their company 10-K's or in their governments' budgets. Calomiris and Haber begin by noting the sharp differences among countries with respect to the performances of their banking systems. Argentina , the Congo and Mexico are the bottom as expected.
This bargain led to a higher frequency of banking panics through time. The United States has had twelve systemic banking crises since 1840, while Canada has had none. Why are banking systems unstable in so many countries--but not in others? The book was much broader, deeper and denser than I had expected. Indeed he embraced the Clinton policies, and. The remainder of the first section is devoted to an economic history of banking and statecraft in the United Kingdom.
France have been vanquished and wold never threaten Britain again. To B-school academics, I recommend considering the book as an adjunct to your standard text for a financial institutions course. Obtaining approval is easier if the bank is perceived as being supportive of local communities. In their view, the more surprising and consequential number is the number of banking crises experienced by Canada during the same time period: zero. Both of these situations came to be not through market forces but through political bargains struck between major groups, and these bargains were enshrined by the parties into regulations which led to the desired outcomes, which unfortunately had significant undesired and unanticipated consequences. The United States has had twelve systemic banking crises since 1840, while Canada has had none.
Also some discussion of certain countries in certain periods China , Germany , Chile. However, rather than stopping there they proceed to describe how the representatives of political systems too often fail their constituents. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances. Their opinions are nuanced and qualified; as scholarly works should be. The overarching theme that unites these disparate groups is a desire to shape the institutional environment to favor their particular interests.
It follows a historical methodology looking at a county and its history through the lens of banking 2018-02 - Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Because unit banks had circumscribed markets, locally rich and powerful merchants and land barons were guaranteed access to credit at most times. Does get a little dry with the detail from time to time so it's not something for everyone but if the topic interests you it's a valuable read. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. This emphasis on the importance of institutions is not novel. The book is rich with detail and insight.
Most materials covering this topic for the broader public explain the 2007-2009 financial crisis as the culmination of greed gone amok. The increase of credit in the economy was measured during this period to show how banking intensity increased. Slavery left indelible marks on Brazilian society. In this, it differs from many economic analyses that stress general principles often without an interest in how they apply in a given situation. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances.